Resource allocation in the welfare state

In a free society scarce economic resources are allocated with the pricing mechanism. Scarcity is causing rising prices informing entrepreneurs to increase supply and consumers to restrict demand. The triumph card for the socialist is that in their society everything is free. The socialists do however face the same reality of scarcity of resources as the free marketeers. The customers just pay differently. To deal with the scarcity the socialists are using a number of mechanisms:
Poor Services
The problem of poor services is pervasive in everything the government is delivering for free. The schools are free. But the buildings are worn down, the books are old, the teaching material insufficient, the teachers are low paid and frustrated etc.

Public communications are cheap but the equipment is worn down, there are frequent irregularities, the buses and trains are periodically stuffed, the schedules are infrequent etc.

Poor services is the socialists way of reducing the supply

Need evaluation
The services are free but the government is evaluating whether you really need the service. When getting old, sick and weak you might be entitled to someone coming helping you in the house. But the government will evaluate whether you are weak enough for the service. Typically you don’t get any help before you are way too weak to manage your home alone.

When you are to weak to live at home you might be entitled to a place in a home for elders. But you don’t get the place until you are way too weak living in your own house.
When you get sick you are entitled to treatment. But the government might decide you are not really needy. So you hump around with your bad leg or whatever is annoying you. The Norwegian government is considering to ensemble death comities to decide whether you are too old or too sick to get treatment.

Need evalutation is one of the socialists ways of reducing demand.
Paying with time
A way to reduce demand is to make queues making people pay with their time. If you get an emergency like breaking your arm or cutting yourself you will find yourself waiting several hours. This will cause those who don’t really need the emergency to step out of the queue managing themselves thereby making demand less.

Similarly you might seek the doctor with some non urgent illness getting time at the doctor in several weeks. Again this will cause people to step out off the queue.

Some will wait in the queue paying with their time. They will sit at the emergency office for hours or go around with their illness for weeks until they get treatment. This time could have been spent productively. A side effect of this is that people with lots of time (workless, retired) will be prioritized at the cost of those with little time (employed, parents)

Some will solve the wait problem seeking private help in which case they did not get the service for free but this will reduce the queue.

Some will decide not to seek help with their hurting arm to find out later that it was broken or that their headake was a brain cancer. The delay of treatment caused them to pay with their health.

To counter the balance a bit some will step out of the queue and get healthy by themselves but overall the cost of paying with time is enormous.

Making people pay with time is another way of reducing demand.

This post has only touched the problems facing the user of the services. The inherent problems of administering an economic system without the pricing mechanism for allocating resources are worthy a separete blogpost.

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Filed under: on October 17, 2010 at 1:40 pm Comments Off

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